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US ag exporters call for more direct SE Asia services   11/06/2019
The Port of Oakland’s growing agricultural exports to Asian markets outside of China highlight the need for more direct shipping services to countries such as Vietnam and Indonesia, according to a trade group that represents shippers of specialty agricultural products.

Exports of farm products through Oakland increased 5 percent to China in the first four months of the year, but were up 12 percent overall from the same months last year as shippers sought to avoid China’s tariffs on US exports. Oakland’s global agricultural exports declined 10 percent in 2018 over 2017. The reversal indicates that farmers are moving quickly to develop markets outside of China, the port stated in a release.

“It’s too soon to declare victory in this segment, given the trade outlook, but our performance so far this year shows two things: there’s continued demand for US farm goods, and growers are resourceful when it comes to finding markets for their products,” said John Driscoll, Port of Oakland maritime director.

Bruce Abbe, past president and consultant to the Midwest Shippers Association, whose members export specialty products such as identity-preserved grains, peas, lentils, and other grain products that move in containers, said some of the recent growth has been to existing markets in North Asia such as Taiwan and South Korea, but the fastest-growing markets are in Southeast Asia.

The major challenge facing US agricultural exporters is that direct ocean services to the fastest-growing markets are certainly not as extensive as shippers are accustomed to in China. Agricultural exporters must therefore transship to countries such as Vietnam, Indonesia, and Malaysia through Singapore or other hubs in the region, which increases transportation costs and lengthens transit times.

 

“There’s a continued need for improved services in Southeast Asia,” Abbe said.

The need is especially evident from the Pacific Northwest gateways, which handle many of the specialty agricultural products grown in the upper Midwest. The Northwest Seaport Alliance of Seattle and Tacoma have favorable intermodal rail services from that region.

Lawence Burns, senior vice president of trade and sales at Hyundai Merchant Marine, said carriers realize the need to rethink service patterns in the trans-Pacific as the China market begins to shrink and Southeast Asia grows in importance. However, carriers deploy new services based on the headhaul, which in the trans-Pacific means the eastbound trade, because higher-value US imports command higher freight rates than the generally low-value export commodities. For example, the spot rate for shipping a 40-foot container from Shanghai to Los Angeles in late May was $1,471 per FEU, while the backhaul Los Angeles to Shanghai rate was $501 per FEU, according to the Shanghai Containerized Freight Index that is published in the JOC.com Shipping and Logistics Pricing Hub.  

Another limiting factor in serving growing markets in Southeast Asia is that many ports there are not equipped to handle the large vessels of 12,000 TEU-plus capacity that carriers deploy in the US-China trade. Transshipping from the mega-ships that call at regional hubs such as Singapore to smaller feeder ships is therefore necessary, Burns said.

In addition, the added weight of US exports, largely commodities such as grains, forest products, scrap paper, plastic, and metals, means a westbound vessel will reach maximum weight capacity before filling its total TEU capacity. In the westbound trans-Pacific, carriers generally consider a vessel to be at capacity when about 60 percent of the TEU slots are filled with loaded containers. The vessel is then topped off with empty containers. This presents yet another problem for carriers because the empties are needed more in China, which is still by far the largest Asian exporter to the US, than in other Asian countries. As a result, the empty containers that accompany US exports must be shipped from Southeast Asia to China to be refilled with merchandise exports to the US.

Oakland reported that the average value per container for its agricultural exports is about $36,000, up from $31,500 last year. Agricultural commodities account for about 37 percent of all international exports shipped from Oakland, and they include higher-priced farm products such as dried fruits, nuts, and refrigerated beef, the port said.




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